May 21, 2018
For 2018, standard deductions nearly double to $24,000 for couples, $12,000 for singles and $18,000 for heads of household. Folks age 65 or up and blind people get $1,300 more per person ($1,600 if
May 14, 2018
Social Security and Medicare Seminar offered May 24, 2018 at 7:00 pm. Location is Mennonite Disaster Service, 583 Airport Road, Lititz PA 17543. If interested please call
May 7, 2018
Review your retirement plan beneficiaries if you haven't done so in a while. You can help avoid unintended consequences by updating beneficiary designations to account for life changes such as marriage, new babies or grandchildren, or the death of a spouse or other listed
May 3, 2018
The IRS's interest rates on taxes are increasing for the second quarter of 2018. On overdue taxes, the IRS will charge 5%. A higher 7% rate will be applied to corporations that owe more than $100,000 in back
April 23, 2018
First quarter payroll is due April 30,
April 19, 2018
Be wary of phone calls that purport to be from the IRS. The Internal Revenue Service continues to issue warnings about a nationwide phone scam regarding
April 7, 2018
April 17th is the filing deadline for 2017 tax returns and
March 27, 2018
If you changed your name because of marriage, divorce, etc, be sure to report the name change to the Social Security Administration. Names shown on tax returns must match Social Security
March 20, 2018
You may be able to deduct long-term-care premiums you paid last year. People age 71 or older can write off as much as $5,110 per person for 2017. Filers age 61 to 70 ... $4,090. Taxpayers age 51 to 60 can deduct up to $1,530. Individuals age 41 to 50 can take $770. And those 40 and younger
March 12, 2018
S Corporation returns are due by March 15,
March 6, 2018
The IRS warns that thieves posing as IRS debt collectors are contacting taxpayers by phone and mail and saying that the Service mistakenly deposited tax refunds into their bank accounts. The fraudsters ask the taxpayers to return the money; don't fall for this
February 27, 2018
The Social Security wage base is expected to be $132,300 for 2019, up $3,900 from this
February 19, 2018
New farm equipement can be depreciated over five years instead of seven years. This doesn't cover grain bins, cotton ginning assets, fences or land
February 15, 2018
Buyers of heavy SUVs used for business can write off up to 100% of the cost, thanks to bonus depreiation. SUVs msut have a gross weight rating over 6,000 pounds to qualify. It doesn't matter if the SUV is new or
January 29, 2018
Forms 1098, 1099 and W-2s are due to recipients and employees by January 31,
January 23, 2018
The IRS will begin accepting 2017 tax returns on Jan. 29. It won't begin processing paper returns until mid-Feb. This delay does not apply to electronically filed
January 8, 2018
The IRS will reject 2017 returns that fail to report required health coverage status. Individuals must check a box on their income tax returns indicating full-year coverage, claim an exemption from Obamacare's individual mandate, or pay a
January 2, 2018
The basic Medicare Part B premium will remain at $134 for
December 18, 2017
The 2018 standard mileage rate for business driving will rise to 54.5 cents a mile, up 1 cent from 2017. The rate for medical travel and moving will go up 1 cent, to 18 cents per mile, and the 2018 allowance for charitable driving will stay at 14 cents a
December 12, 2017
The Employee Contribution Rate for PA UC has decreased for 2018. The 2018 rate is 0.06% (.0006). There is no wage limit for the employee
November 28, 2017
If you think you will be hit by the 0.9% Medicare surtax on earned income . . . consider jacking up the withholding. The levy kicks in for single taxpayers and heads of household with earnings over $200,000 . . . $250,000 for married
November 20, 2017
If you are planning to buy health coverage for 2018 on the marketplace, note the shorter enrollment period. It runs only through December 15. Most who buy insurance on a marketplace will qualify for tax
November 16, 2017
Many key dollar limits on retirement plans will be a bit higher next year. The maximum 401(k) contribution is rising to $18,500, an increase of $500 over this
November 6, 2017
Social Security recipients will see a 2% increase in their benefits in 2018. But, most will see part of the hike pay for higher Medicare Part B
October 30, 2017
The Social Security wage base will go up $1,500, to $128,700, in
October 23, 2017
The American Opportunity Tax Credit is worth up to $2,500 per student for each of the first four years of
October 16, 2017
The IRS has a strong warning for owners of self-directed IRAs: Beware of promoters advertising IRS-approved investments for IRAs. These come-ons falsely claim that the IRS has okayed particular retirement investments. In reality, the IRS does not review, approve, or endorse any
October 9, 2017
Withdrawals from 529 plans used for postsecondary education are tax-free. Eligible expenses include the cost of tuition, books, supplies, computers, internet and mandatory fees. Room and board qualify for students enrolled at least
October 2, 2017
Beware of scam e-mails allegedly from the FBI and IRS. The electronic communications, which use the emblems of both agencies, request that the reader complete a required FBI questionnaire by clicking on a link. Don't click on the link or open any attachments. This is a phishing scam that aims to install a malicious program called ransomware on the user's computer, blocking access to data...
September 25, 2017
The annual gift tax exclusion will increase next year to
September 18, 2017
If you're taking a distribution from your IRA, is it better taxwise to be age 60 instead of 58? Folks who are under age 59 1/2 on the date of the payout owe a 10% penalty, unless they qualify for an
September 11, 2017
Want to help people affected by Harvey, Irma and other disasters? Make sure to give to an IRS-recognized charity if you want a tax write-off. Also, watch out for bogus charities and
September 5, 2017
Here is a tip if you inherit an IRA from someone other than a spouse. Ask the custodian to retitle the account as a properly titled inherited IRA to include the name of the decedent and the beneficiary. Here is an illustration: "John Smith (deceased March 14, 2016) IRA for the benefit of Laura
August 28, 2017
Trucker's Form 2290 is due August 31,
August 21, 2017
The Social Security wage base for 2018 is projected to be $130,500, up $3,300 from this year's cap, according to Social Security Admin.
August 14, 2017
Revised I-9 Form available @
August 7, 2017
The latest IRS phone scams involves fraudsters impersonating agency employees and calling victims to inform them of bogus certified letters that were returned to the IRS as undeliverable. Please remember, the IRS does not
July 31, 2017
Keep this in mind if your school-age child is going to a summer day camp: the cost qualifies for the dependent care
If you wish to participate in the UC Amnesty Program, we suggest that you login to your account at www.uctax.pa.gov and navigate to the Make A Payment menu. Your payment must be received or postmarked during the amnesty period from: July 1, 2017 through September 30,
July 17, 2017
College grads fortunate enough to be starting a full-time job, take note: use part-year withholding to boost your paycheck and have less tax
July 6, 2017
Businesses should keep payroll tax records for a minimum of four years after the date for employees to file their income tax returns for the particular year. Data to be retained include wage amounts, payment dates and employee information. Also copies of all W-4 forms, payroll returns, and amounts and dates of tax
July 3, 2017
Coverdell education savings accounts are another option for college savings plans. As with 529 plans, distributions from them are tax-free if the funds are used for education expenses. Annual payins are capped at
June 12, 2017
Think twice before donating to charity the right to use your vacation home. You don't get a charitable write-off because you gave only a partial interest in the property. Nor is there any deduction for the winning bidder, unless the charity received more from the person than the place is wroth when awarding use of the
June 5, 2017
The Social Security wage base is projected to rise to $130,200 for 2018, a $3,000 increase from this year's
May 30, 2017
A reminder when buying real estate property for business or investment: the buyer must allocate the purchase price between land and buildings to detemine how much of the cost is depreciable (building) and nondepreciable
May 22, 2017
The annual ceiling on deductible payins to HSAs is slated to go up in 2018 to $3,450 for account owners with self-only coverage and to $6,900 for those with family coverage. People born before 1964 can put in an additional
May 18, 2017
Relatives or others can pay tuition directly to a school, free of gift tax. This payment doesn't count againt the $14,000-per-donee annual gift tax exclusion or the lifetime estate tax exemption. It can be a nice present for a college
May 15, 2017
If you have savings bonds, think about using them to help pay for college. Generally, interest on savings bonds must be reported as income on the federal return in the year the instruments mature or when they are redeemed, whichever is
May 11, 2017
Losses in poorly performing Roth IRAs are not deductible by account owners. That's because the investments are owned by the Roth and not the holder on the
May 8, 2017
The IRS confirmst that flexible spending accounts cannot reimburse for health insurance
May 1, 2017
Please call our office with questions about Pennsylvania Business Education Tax
April 24, 2017
There is no federal tax deduction on payins for 529 College Savings
April 17, 2017
Thank you for a great tax
April 10, 2017
Have your driver's license handy when you work on your tax return. The IRS and some states are asking for the license number for added security to curb fraudulent refunds on electrically filed
April 3, 2017
Your IRA contribution for 2016 is due by April 18,
March 27, 2017
The tax deadline for your 2016 return is April 18th. If you need more time, file and extension by April
March 20, 2017
A scam that targets payroll and human resource professionals is back. It is a scam where fraudsters send out phony e-mails to company payroll departments asking for a list of employees, W-2 data and more. The e-mails come from false websites and use the information for nefarious purposes, including filing fraudulent tax returns claiming refunds. It has spread beyond the corporate...
March 8, 2017
Folks to turned 70 1/2 last year and opted to delay your 2016 IRA payout; you must take the required minimum distribution by April 1 of this
February 27, 2017
Farm returns are due by Wednesday, March 1,
February 22, 2017
The 2017 payin limits for IRAs and Roth IRAs also stay steady at $5,500, plus $1,000 as an additional catch-up contribution for taxpayers age 50 and
February 15, 2017
The threshold for deducting medical expenses on Schedule A jumps to 10% of AGI for taxpayers who are age 65 or older, starting with 2017 returns filed in
February 13, 2017
Parents who help a child repay a student loan cannot deduct interest that they pay on the debt unless they are also legally liable on the loan for the repayment. But all is not lost. They student may be entiled to the interest deduction, even the parent paid the student
February 7, 2017
Federal tax returns for calendar-year regular corporations are due April
February 2, 2017
For most, the 2017 monthly Medicare Part B premiums average $109. However, the basic premium increases to $134 a month for some people. The group that pays more includes individuals who first enroll in Part B for 2017 and folks who do not have premiums deducted from monthly Social Security
February 1, 2017
AMT Exemptions go up for 2017. They increase to $84,500 for couples and $54,300 for both singles and heads of
January 30, 2017
One way to help protect yourself from tax-related identity theft is to file your tax return
January 23, 2017
A reminder that the IRS will begin accepting 2016 tax returns on Jan. 23. and the filing deadline for individual returns is April
January 16, 2017
Social Security recipients will see a tiny 0.3% hike in their benefits for
January 12, 2017
The Social Security wage base increases in 2017 to $127,200, up $8,700 from 2016's cap. The Social Security tax rate on employers and employees remains at
January 9, 2017
The 2017 standard mileage rate for business driving falls to 53 1/2 cents a mile, a 0.5 cent drop. The rate decreases to 17 cents a mile for medical purposes and job-related moves. The rate for charitable driving remains at 14 cents per
January 5, 2017
Returns of partnerships are due 2 1/2 months after year-end, March 15th for calendar year firms. Those needing more time can request a six-month
January 3, 2017
Employers are required to file W-2s with the federal government by Jan. 31, up from the prior deadlines of Feb. 28 for paper returns and March 31 for e-filings. This earlier deadline matches the date for sending copies of the forms to employees. The Jan. 31 due date also applies to 1099s reporting nonemployee
December 27, 2016
When doing tax planning this year, don't forget the kiddie tax for children with investment income such as capital gains, dividends or interest. If the child is under age 19 or is a full-time student under age 24 who pays less than half of his or her support, then the child's unearned income in excess of $2,100 for 2016 is taxed at the parent's higher income tax
December 20, 2016
The 2017 standard mileage rate for business driving will fall to 53 1/2 cents per mile, down 0.5 cents from
December 12, 2016
Employers will get more time to report worker health coverage for 2016. Firms with 50 or more full-time equivalent employees must use Form 1095-C to report 2016 insurance data for each full-timer to both the Service and the worker. The forms are due to employees by March 2, 2017, instead of Jan.
December 8, 2016
For most, the 2017 monthly Medicare Part B premiums will average $109. However, the basic premium increases to $134 a month for some people. The group that will pay more includes individuals who first enroll in Part B for 2017 and folks who do not have premiums deducted from monthly Social Security
December 6, 2016
If you're planning to convert a traditional IRA to a Roth this year, think again. Future tax rates are key in determining whether a Roth conversion pays off. If your tax rate in retirement will be lower, tax-free payouts are less
December 5, 2016
IRA owners who turned 70 1/2 this year should consider delaying withdrawals. Folks age 70 1/2 and up must take distributions from their traditional IRAs each year. Those who've turned 70 1/2 this year can postpone their 2016 payout until April 1, 2017. Doing so not only delays the tax bill, but also could save money if tax rates
November 29, 2016
Buying a new heavy SUV by Dec. 31 can generate a slew of tax breaks. Up to $25,000 of the cost of a new SUV with gross vehicle weight over 6,000 pounds can be expensed, the balance gets 50% bonus depreciation, and the remainder may qualify for regular five-year
November 28, 2016
Act fast if you're considering putting energy-efficient windows in your home. A limited credit is available if you install them by Dec.
November 22, 2016
Donate appreciated stock or mutual fund shares to a tax-exempt charity. Provided you have owned the property for more than a year, you can deduct its full value. Neither you nor the charitable organization has to pay tax on the
November 21, 2016
Be wary of buying a mutual fund late in the year for your taxable portfolio. If the fund pays a 2016 dividend after you buy it, you owe tax on the payout this
November 17, 2016
Think about selling some poor performers in your investment portfolio. Capital losses that you incur can offset your capital gains plus up to $3,000 of other income. Any excess losses are then carried over to the next year and can help offset future capital
November 15, 2016
Be sure to check your health flexible spending account. You must clean it out by Dec 31 if your employer hasn't implemented either the 2 1/2 month grace period or the $500 carryover rule. Otherwise, you will forfeit any money left in the
November 14, 2016
Consider whether it's the right time to convert a traditional IRA to a Roth IRA. You will have to pay tax on the converted funds, but once the money is in the Roth, future earnings are
November 10, 2016
Pay attention to the required distribution rules for traditional IRAs. Folks age 70 1/2 and older must take withdrawals by year-end or pay a penalty equal to 50% of the
November 8, 2016
Businesses putting assets into service by Dec 31 can provide large write-offs: 50% bonus depreciation is one. Companies can deduct half the cost of new assets with useful lvies of 20 years or less that are put into use this year, including machinery and equipment, land improvemnents and some farm
November 7, 2016
Take advantage of the gift tax exclusion this year. For 2016, you can give up to $14,000 apiece to a child or other person without tax
November 3, 2016
The standard deduction for married filing jointly rises to $12,700 for tax year 2017, up $100 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $6,350 in 2017, up from $6,300 in 2016, and for heads of households, the standard deduction will be $9,350 for tax year 2017, up from $9,300 for tax year
October 31, 2016
The personal exemption for tax year 2017 remains as it was for 2016 at
October 27, 2016
The cost of creating some software qualifies for the R&D credit, the IRS says in final regulations. Software developed to be commercially licensed or sold to third parties is eligible for the
October 25, 2016
Social Security recipients will see a tiny 0.3%hike in their benefits in 2017. People who turn 66 next year will not lose any benefits if they earn $44,880 or less before they reach that age. Individuals who are 62 through 65 by the end of 2017 can make up to $16,290 before they lose any benefits. There is no earnings cap once a beneficiary turns
October 24, 2016
The Social Security wage base will be going up next year to $127,200, an $8,700 hike over this year's cap. The Social Security tax rate on employers and employees will stay at 6.2%. Employer's share of Medicare tax will remain 1.45% on all
October 20, 2016
Failing to get the IRS's consent to an accounting method change proves costly for a businessman. After years of reporting income and expenses on the cash method, he changed to the accural method so he could deduct $78,000 in legal fees billed to him. But, because he didn't obtain the IRS's approval before switching his accounting method, the Tax Court said he must stick to the cash...
The IRS's simplified per diems for lodging, meals and incidentals are rising a bit. In high-cost localities, employees can get up to $282 per day free of tax, an increase of $7. In other areas, their daily stipend is capped at $189, up
The IRS's private debt-collection program will be up and running next spring. A law passed last year calls for the IRS to turn over many inactive receivables to private debt collectors in an effort to recoup overdue taxes owed by
Another month, another e-mail scam. The latest warning from the IRS involves fraudsters sending false CP2000 tax bills to people via electronic mail. The language in the fake bill references taxes owed under the Affordable Care Act. If you get one of these communcations, don't open the attachment. And remember, the IRS does not initiate contact with taxpayers through e-mail or social...
The deadline is October 15th for individual tax returns with extensions filed. If you have questions, please contact our
The Department of Community and Economic Development offers their apologies for any delay in the approval letters to companies seeking either EITC or OSTC tax credit approval. The good news is that approval letters will start going out next
Review your retirement plan beneficiaries, if you haven't done so in a while. You can help avoid unintended consequences by updating beneficiary designations of your 401(k) or 403(b) plans, annuities, pensions and IRAs to account for life changes such as marriage, divorce or the death of a spouse or other listed
If you have an extension, Oct. 17 is also the due date for several actions: Filing your 2015 return. Setting up a SEP-IRA and contributing money to it for 2015, and making a 2015 payin to a Keogh plan that was established before Jan. 1,
The deadline for changing your mind on a 2015 Roth conversion is nearing. You have until Oc. 17 to undo the switch and recover the income tax paid on the conversion. This can save you money if the balance in your Roth has fallen since you converted it from a traditional
Beginning with 2017 returns due in 2018, the threshold for deducting medical costs on Schedule A jumps to 10% of adjusted gross income for taxpayers who are age 65 or
Tax changes enacted by lawmakers late last year mandate that, starting with 2016 returns due in 2017, the IRS must wait until Fe. 15 before doling out refunds to taxpayers who claim either the earned income credit or the refundable child
The cost of a computer is not eligible for the American Opportunity Tax Credit unless a university requires students to have
You can claim a credit for 30% of the total cost for solar panels. For solar energy systems installed in a residence, the full credit applies through 2019 and then phases out until it ends after 2021. The break for geothermal heat pumps, residential wind turbines and fuel cell property currently expires after this
Can I get a tax break for putting energy-efficient windows in my home? Yes, a limited credit is available if you install them by Dec. 31. The tax law extended through 2016 the credit for energy-saving items such as windows, insulation, roofs and doors. It stays at 10% with a $500 maxiumum. Any credits taken in prior years count against the $500. Many items are capped: no more than $50 for...
Previously precluded by PA regulation, estates of decedents can now claim rebates from the class fund if they died in the years 2004-2009 and paid their real estate property taxes in the year of death, and if they received a property tax rebate in the year before death. In the case of Muscarella v. Commonwealth, Class counsel, Richard Stern, said that claims could range up to $975 per...
Companies that offer unaffordable health insurance will owe a fine for 2016 equal to $3,240 for each full-timer who gets a subsidy for exchange-bought insurance. 2015's fine was $3,120. For 2016, coverage is affordable if the required premium pay in from a worker for self-only coverage doesn't exceed 9.66% of total household
The employer mandate is in full swing. The mandate applies only to large employers, those with 50 or more full-time employees. These firms must offer health coverage to full-time employees and their dependents or pay up. Full-timers are those employed on average at least 30 hours a
Paying overdue taxes in installments is about to become more expensive. The Service is proposing a stiff fee hike to go into effect on Jan. 1, 2017. The charge for new installment plans will be $225, a $105 jump from today's cost. The outlay for direct debit installment agreements will more than double to $107. And for restructuring or reinstating an existing plan, the fee will rise $39 to...
Helping to pay another's mortgage doesn't make the interest deductible. A filer who lived with his girlfriend in her home claimed he paid her cash so she could make the mortgage payments on the house. He then deducted the interest, even though he wasn't liable on the mortgage and the house wasn't titled in his name. He wasn't an equitable owner of the property because he bore no burdens or...
Expenses incurred before a business is started are not deductible. Although you can spend time and money, if you have no clients, service contracts or receipts, you are in the preparatory stage. But, the consolation is that once the business begins, firms can make an election to deduct $10,000 of the preopening costs and amortize the rest of 180
If you have income from the cancellation or discharge of indebtedness, keep in mind that insolvent taxpayers can escape tax on forgiven debts. Taxpayers whose liabilities are greater than the fair market value of their assets can exclude income from forgiven debts up to the amount of their
Make the most of your generosity when donating to charitable organizations. Give appreciated assets, such as stocks, real estate and mutual fund shares. Provided you have owned the property for more than one year, you can deduct its full value in most
The due date for Form 2290 for truckers is August 31, 2016. Please contact our office with any
For individuals working abroad and taking the foreign housing exclusion: Make sure your expenses are reasonable.
Lavish or extrvagant costs do not qualify as eligible housing expenses in determining the tax-free amount. Ditto for the cost of domestic labor, pay TV subscriptions, funiture or accessories, improvements that increase the value of your property and certain other...
PA will cut you a break if you suffer a casualty loss. Effective 9/11/16, taxpayers may now defer tax on insurance proceeds that exceed the tax basis of assets lost by fire or natural disaster. Previously, PA taxed the gain even if the proceeds were used to
Real estate transfer tax will no longer apply to conservation easements effective 9/11/16. Income tax will still apply, but you may be able to defer some federal tax. Please contact Covenant CPA LLC early in the easement process to minimize the tax
August 10, 2016
IRS has a handy guide for churches that will be helpful this election year. Publication 1828 explains in plain language the tax rules that are applicable to them. Among the topics it covers: Activities that can jeopardize a church’s tax exemption. Unrelated business income tax. Substantiation rules for deductible...
Feeling lucky? Effective 1/1/16, PA lottery winnings are subject to PA tax. They have always been subject to federal income
It is now easier to avoid PA inheritance tax on family farms and businesses. The definition of who can receive a family farm now includes trusts for the benefit of family members and certain relatives of the decedent's spouse. Please contact our office with
Selling a residence quickly due to the birth of a baby can net a tax break: A reduced home-sale exclusion.
Taxpayers who have owned and used a home as their principal residence for at least two of the five years leading up to the sale can exclude up to $250,000 ($500,000 if married) of the gain when they sell the place. In this...
Behind in filing your PA taxes? PA will offer a 60 day "Amnesty" period where 100% of penalties and 50% of interest will be waived. The exact dates of the Amnesty period have not been determined ye, but it is required to end by
To view details of PA Act 84 use the link below.
Streaming/downloads are now...
Sales tax credit is now limited. The 1% credit granted to vendors to offset their costs in being the State's Sales Tax Collector is capped effective 8/1 at $25 for monthly filers, $75 for quarterly filers, and $150 for semi-annual filers. Watch for that the next time you file. Please contact our office with any
Think about making a contribution to a Roth IRA for a working child. The 2016 limit $5,500, but the amount can't exceed the child's 2016 earnings. The payin counts toward the gift tax exclusion, but there are key benefits to Roths. Payins can be pulled out tax-free at any time. Withdrawals after age 59 1/2 aren't taxed. And up to $10,000 of earnings can be taken out free of tax to help buy a...
Cash rewards to employees for participating in wellness programs are taxable. A firm provides benefits under a wellness program at no cost to employees. Participants are able to earn cash awards or gym memberships from the employer. Those perks are taxable wages and subject to payroll
If you move but keep your citizenship, the U.S. will continue to tax you. The U.S. taxes its citizens on their worldwide income, no matter where they
This election season, many people will get paid for working at the polls. Their compensation is taxable. But, income tax withholding isn't required unless the worker requests it by giving a completed W-4 to the state or
Some filers who claim the earned income credit could see delayed refunds. Ditto for people taking the refundable child credit. Changes enacted last year mandate that, starting with the 2016 tax returns, the Service must wait until Feb. 15 before doling out refunds to these
July 1st is the deadline for the PA Educational Tax Credit (EITC) for new applicants. This is a tax credit to eligible businesses contributing to a Scholarship Organization, an Educational Improvement Organization and/or a Pre-Kindergarten Scholarship Organization. This enables tax credits to be applied against the tax liability of a business or business owner for the tax year in which...
If you owe debt to any federal or state agency, please take note: the IRS can grab your tax refund and apply it against the amount you
Under the FLSA, employees who work more than 40 hours in a week are entitled to overtime pay, unless their annual salary is $46,476 or higher. Covenant CPA LLC understands that the DOL rule may impact major business decisions like hiring, expansion, offering new benefits or more flexible work arrangements for employees, and possibly even require reductions at your company. We can help you in...
Worker's compensation paid in lieu of Social Security benefits is taxable. For income tax purposes, they are treated just like other Social Security
Sometimes the IRS reclassifies contractors as employees. To get relief, a business must have filed 1099s for the disputed workers and treated all similarly situated workers as contractors. In addition, the company must have had a reasonable basis for treating them as contractors and not
Some return red flags could increase the risk of an IRS audit. Among them: taking large charitable write-offs. Deducting business meals and entertainment. Claiming 100% business use of a vehicle. Writing off a large loss on Schedule Cfrom an activity that looks like a hobby. Taking higher-than-average deductions and rental losses or
If you owe back payroll taxes, the IRS will grab future personal refunds and apply them against the oustanding
Covenant CPA LLC is offering a QuickBooks Seminar on Wednesday, May 25 at 9:00 a.m. Please contact our office if you are
Small businesses have many options to help workers save for retirement: SEPs, SIMPLE IRAs, payroll deduction IRAs, profit sharing plans, 401(k)s and defined benefit
IRS's interest rates are increasing for the second quarter of 2016. On overdue taxes, the agency will charge 4% for most. A higher 6% rate will be applied to corporations that owe more than $100,000 in back
April 13, 2016
The number of people affected by last year's hack on the IRS keeps going up. Last May, the agency announced that tax data on 114,000 individuals was stolen in the cyberattacks on its "Get Transcript" web tool. In August, it said 220,000 more folks may have been victimized by the breach. Now it's raising the number even higher saying an additional 390,000 or so taxpayer accounts were...
Workers who have access to an affordable employer-sponsored health plan that meets Obamacare's coverage standards, but decline to participate in the plan, don't qualify for premium tax credits for insurance they purchase on an exchange. This restriction does not apply to retirees who are otherwise ineligible for Medicare. They can forgo the option for retiree coverage under their former...
March 30, 2016
The energy-saving home improvement tax credit was extended through 2016. The credt remains at 10% with a $500 maximum. Any credits taken prior years count against the $500. And many items are capped: no more than $150 can be claimed for water heaters and furnaces, $200 for windows and skylights, and $300 for biomass fuel stoves. There is a 30% credit for residential solar panels and other...
If you own a traditional IRA and pay the fees out of pocket, you can claim them on Schedule A as a miscellaneous itemized expense to the extent all qualified costs exceed 2% of AGI. You can't write off fees charged directly to the IRA. Roth IRAs are more complicated. The prevailing view is that Roth fees aren't deductible because they're incurred to produce tax-free income whether the fees...
The tax court confirms that damages received for emotional distress are taxable. A woman claimed she was retaliated against by her former employer because she requested medical accommodations for an earlier workplace injury. She filed a discrimination lawsuit and a judge awarded her damages for emotional distress. She claimed her emotional trauma was related to a previous physical injury so...
If you didn’t have health care coverage last year, you may qualify for an exemption. Among the exemptions: people who went without insurance for a period of less than 3 months, people for whom health coverage is unaffordable, those with a household income below the thresholds for filing a return, and folks who can show hardship forced them to go without coverage. People seeking one of...
For most, the monthly Medicare Part B premium remains $104.90 in 2016. However, the basic premium increases to $121.80 a month for some people. The affected group that pays more includes individuals who first enroll for 2016 and folks who do not have premiums deducted from monthly Social Security
The rules for casualty loss write-offs state that you can deduct losses from tornadoes, blizzards and such to the extent you aren’t reimbursed by insurance. However, if you do not file a timely claim on insured property, you can’t take the
New Health Care Reporting Form: Businesses with 50 or more full-time employees must send out Form 1095-C by March 31 to report 2015 health coverage data for workers and their family members. Employers with fewer than 50 full-time employees that provide self-insured medical coverage must send Form 10-95-B. Folks who bought coverage on an exchange should receive Form
The 2016 monthly limit on employer-provided tax-free parking jumps to $255 this year. The exclusion for mass transit passes and commuter vans now matches that
The adoption credit can be taken on up to $13,460 of costs, a $60
Payments a woman got for agreeing to be faithful to her boyfriend are taxable. After dating for about a year, a couple pledged their fidelity to each other in writing. The agreement required him to pay her $400,000. Later, he accused her of cheating. They broke up and he sued her. He also filed a 1099 Misc, reporting the payment. A state court found that she defauded him and required her...
The annual cap on deductible contributions to HSAs rises to $6,750 in 2016 for account owners with family
The 2016 standard deductions go up a bit for heads of household . . . $9,300, plus $1,500 more once they reach age 65. Marrieds can take $12,600 plus $1,250 for each spouse age 65 or older. Singles get $6,300 . . . $7,850 if age 65 or up in
The 2016 pay in limits for IRAs and Roth IRAs stay steady at $5,500, plus $1,000 as an additional catch-up contribution for taxpayers age 50 and
The individual mandate's fine for going without health coverage soars in 2016. The tax is typcially the greater of two amounts: The basic fine or an income-based levy. The basic fine is rising to $695 per adult ($347.50 per child) with a family ceiling of $2,085 . . . up from $325 and $975 in 2015. If you have questions, please call our
The President has signed the Protecting Americans from Tax Hikes (PATH) Act which extends numerous tax provisions. Some important tax provisions have been made permanent, while others were extended through 2016 or 2019. The PATH Act also adds in other miscellaneous provisions to combat erroneous eduction credit, child tax credit and earned income tax credit claims. Some of the most notable...
The tax benefits associated with charitable giving could potentially enhance your ability to give and should be considered as part of your year-end tax
Be sure to check your health flexible spending account. You must clean it out by Dec. 31 if your employer hasn't implemented either the 2 1/2 month grace period or the $500 carryover rule. Otherwise, you will forfeit any money left in your
The IRS simplified the paperwork and recordkeeping requirements for small businesses by raising the safe harbor threshold for deducting certain capital items from $500 to $2,500. If you have questions, please contact our
It's health coverage open enrollment season. If you opt out of coverage for next year, the penalties are going up substantially. For 2016, the basic fine is soaring to $695 per adult with a family ceiling of $2,085 up from $325 and $975 this year. The income-based levy is increasing from 2% to 2.5% of household
The PA budget "framework" includes a 1.25 point increase in PA sales tax from 6% to 7.25%. It has not passed yet, but this will affect material purchases when/if the law takes effect. You may want to use 7.25% when calculating your material costs for
Individuals should take note of state taxes when planning for retirement. Many states give some type of tax break on retirement
Withdrawals from 529 plans used for postsecondary education are tax-free. The American Opportunity Credit is worth up to $2,500 per student for each year of the first four years of college. Please call our office if you have
There will be no increase in the Social Security wage base for 2016. It will stay at $118,500. Please contact our office with any
New heavy SUVs put in service in 2015 will keep their privileged tax status, provided lawmakers extend 50% bonus depreciation and the higher expensing limits. Up to $25,000 of the cost of new SUVs with gross vehicle weights over 6,000 pounds can be expensed. Please call our office if you have
Before reporting rental income and expenses on Schedule E or C, it is important to determine the number of personal and mixed-use days. Keeping a detailed log will help if the IRS decides to question the claim. Please contact our office if you need assistance or have any
Following the emergence of more aggressive and widespread tax scams, the IRS issued another warning to taxpayers to remain on high alert and protect themselves against the deceitful tactics that scammers use to trick people. Never provide personal information, financial or otherwise, to suspicious websites or strangers calling. The IRS will not call about taxes; they will contact you by...
If you filed an extension for your personal tax return, the filing due date is October 15, 2015. Contact our office if you need help filing your federal, state or local returns. Our office also specializes in multi-state
Notice 2015-63 announces the 2015-2016 per diem rates for substantiating employees' business expenses for lodging, meals and incidental expenses incurred while traveling away from home. The M&IE rates for the transportation industry increased from $59 to $63 for travel in the continental U.S. and from $65 to $68 outside the continental U.S. The incidental-expense-only rate remains at $5...
Now is a good time to see if you will qualify for either of two college tax credits or other education-related tax benefits when you file your 2015 federal income tax return. Contact our office with any
The IRS has three years from the due date of the tax return to audit and adjust a tax return. A taxpayer can amend a tax return for three years. The due date for your 2014 tax return was April 15, 2015. Even if you file a return on March 1, 2015, the IRS has until April 15, 2018 to audit the return. You have until April 15, 2018 to amend the return. If you extend the due date of the return,...
You will need to summarize what you are currently spending. This can be developed in a summary in one of several ways:
- Pencil, paper and adding machine.
- A spreadsheet such as Excel. Excel has some templates that might be helpful.
Health Savings Accounts (HSA) are similar to individual retirement accounts for medical expenses. Both individuals and employers can contribute to an HSA for eligible individuals. To be eligible for an HSA you:
1) Must be covered under a high-deductible health insurance plan.
2) May not be covered by any other health plan including Medicare.
3) Can not be...
Looking for a more convenient way to pay the IRS? Want to be sure your payment is applied to your account and not "lost" in the mail?
1) We can set you up for electronic payment of your balance due and the next years estimates when you file your tax return.
You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time.
Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:
- Owned the home for at...
Form 2290 "Heavy Highway Vehicle Use" is due August 31, 2015 on vehicles used with gross weight of 55,000 pounds or more. You can complete the suspension statement if the vehicle is used 5,000 miles or less (7,500 for agricultural). If the vehicle is destroyed, stolen or sold you can claim a credit. Please contact our office if you have any questions or need help filing the...
The extended time to transition to the guidelines regarding health coverage reimbursement arrangements and employer payment plans in IRS Notice 2015-17 has expired as of June 30, 2015. The $100 per-day per-employee penalty for failure to comply is back.
A few highlights to take away from Notice 2015-17 are:
- Reaffirms that after tax arrangements which are...
Your automobile may provide you with several tax deductions that may lower your income tax. As with all deductions, it's important to maintain accurate records of your expenses.
You need to record all of the miles incurred for business purposes, dates of business use, destinations and business purpose.
Record odometer readings at the beginning and end of the year to determine...
Is your W-4 correctly filed with your Employer?
- If you are a W-2 wage earner and your balance due or refund was too large on your 2014 tax return, adjust your withholding amount.
- You can submit an updated W-4 Form at any time with your Employer, find a form on the IRS website.
- The IRS has a calculator tool that can help you fill out the form...
If you have foreign accounts with a value of $10,000 or more you have an annual reporting obligation, even when the accounts produce no taxable income. The penalty for failing to file an FBAR is up to $10,000 per violation. Call our office if you have any
Starting a new Business? Did you know firms can elect to write off up to $5,000 of start-up costs in the first year they actively engage in business. Any remaining amount is amortized over 15
Didn't get your Refund Yet? Did you know that both the IRS and PA have links on their websites to check the status of your refund?
Did you know about the Pennsylvania Property Tax / Rent Rebate Program?
The program benefits eligible PA residents age 65+; widows and widowers age 50 +; and people with disabilities age 18+. If the eligible person is a homeowner with income less than $35,000 or a Renter with Income less than $15,000 they can qualify for $250 up to $650 in a rebate. Contact our office if...
Allowing employees to telecommute, also known as working remotely, is a major trend destined to reshape the way that companies recruit and manage employees in just about every industry. According to a 2013 survey conducted by the Society for Human Resource Management, more companies were planning to offer telecommuting in 2014 than any other new benefit. And, research by Global Workplace...
While we’ve just celebrated the first official summer holiday weekend, studies show that almost 75 percent of employees do not take all of their allotted vacation time. In fact, many employees hesitate to take a break from work, and those that do often check in at least daily while on vacation, returning emails or taking calls. This may seem like true dedication to a job, but experts...
Many business owners are unaware of the Pension Protection Act passed in 2006 and its potentially costly tax implications for beneficiaries of employer-owned life insurance (EOLI) policies. This legislation enforces a tax rate of up to 50 percent on the death benefits of EOLI policies purchased after August 17, 2006. Normally, these benefits would be tax exempt—and they still can be if...
According to the most recent U.S. Department of Justice data, approximately 7 percent of U.S. residents age 16 or older are victims of identity theft each year. While the overall percentage of Americans affected by identity theft has held steady since 2008, identity theft related to tax information is increasing rapidly. In fact, the Federal Trade Commission (FTC) recently released statistics...
April 14, 2014
Hopefully you have already filed your tax return and are anticipating at least a modest refund. But, before you get too excited about splurging with your IRS check, stop for a moment and remember that you earned that money! While many people view a tax refund as ‘bonus’ cash—it isn’t. It is simply a return of the funds that you earned and paid as tax beyond what your actual obligation...
March 31, 2014
With the business tax return deadline behind us, this is an ideal time to think about giving your business a little post-tax season tune-up with the intention of making next tax year easier and improving your financial situation. Here are a few key areas to consider analyzing now that your business taxes are filed:
Day-to-day accounting. With the rush of preparing...
March 17, 2014
There’s no disputing the fact that raising children today is a costly endeavor. However, the American Taxpayer Relief Act of 2012 (ATRA) has eased parents’ tax burden and put a few dollars back in their pockets with the Child Tax Credit, which ATRA made permanent. This tax credit can be worth as much as $1,000 per qualifying child depending upon a parent’s income.
March 4, 2014
A nice home office is often one of the biggest perks of being a freelancer, and it can also provide you with a significant tax deduction if you qualify for it. Up until this tax year, the calculations needed to claim the home office deduction were complex and required meticulous record keeping and a separate form (Form 8829). However, starting with your 2013 tax return, the IRS has introduced...
February 13, 2014
With tax season in full swing, you are likely busy compiling all of your tax documents and expense receipts to support the preparation of your return. When you think about it, there is a lot you can learn from preparing to file your tax return. It provides the perfect snapshot of where you stand financially, which can offer important insights into your money management habits. While there are...
January 31, 2014
With tax season here, you might be wondering just how likely you are to hear from the IRS after you file by means of an audit notice. While the chances you will be audited are relatively low if you file a straightforward personal tax return, the more complex your tax situation becomes (reporting business income or graduating to a high-income tax bracket, for example), the more likely it is...
January 17, 2014
If your business spends $600 or more for services from another business or an individual contractor during the tax year, you may have to report the amount on a Form 1099. The requirement to file 1099s applies to all types of businesses, C-Corporations, S-Corporations, LLCs, all partnerships, and sole proprietorships. Forms 1099 are normally issued to unincorporated...
January 3, 2014
Happy New Year! Now that the holidays are over, it’s time to get serious about reviewing where you stand from a tax perspective. As you may recall, in 2013 Congress and President Obama made a budget deal to avoid the fiscal cliff which resulted in seven tax increases. In addition to these increases, the introduction of the Affordable Care Act (also known as Obamacare) also included six...
December 17, 2013
With the end of the year on the horizon, many individuals with flexible spending accounts (FSAs) are scurrying to spend residual funds to avoid “losing” them, in accordance with IRS regulations. However, the regulations have now changed with the IRS easing the “use-it-or-lose-it” rule for health flexible spending plans. Individuals with FSAs can now carry over a maximum of $500 to...
November 26, 2013
If you’re nearing the customary retirement age of 65, you may be considering when to apply for Medicare and Social Security benefits. This is an important decision that can have significant impact on your financial situation down the road, so it is important to understand how these benefit programs work. In particular, if you are not planning to retire at the full retirement age (FRA) of 65...
November 14, 2013
The IRS recently announced that, for the second year in a row, it will delay the start of tax season. However, the April 15 filing deadline, which is set by statute, remains in place. Last year it was the fiscal cliff negotiations that pushed back the start of the tax filing period. This year, of course, it is the 16-day government shutdown that put the IRS approximately one to two weeks...
October 30, 2013
If you own a Limited Liability Company (LLC) that you are not actively managing, but you claim tax deductions, this blog post will be of interest to you. Close to 30 years ago, the IRS passive activity loss (PAL) rules (I.R.C. Section 469) were enacted to limit the degree to which money-losing LLCs could be used as tax shelters by their owners claiming losses—such as depreciation, interest,...
October 16, 2013
Halloween is just around the corner and in a few short weeks the calendar will flip to November 1—the unofficial beginning to the winter holiday season that can seriously reduce employee productivity. After all, who has time to put in a solid eight hours a day at the office when there is seasonal shopping, schmoozing, and socializing to be done?
Many business owners have a...
October 4, 2013
Employers providing healthcare insurance that includes prescription drug benefits are required to notify Medicare-eligible employees by October 15 of each year whether their drug benefit is "creditable coverage," meaning that it is expected to cover, on average, as much as the standard Medicare Part D prescription drug plan.
The Centers for Medicare and Medicaid Services (CMS)...
September 30, 2013
While the end of the year may seem like it’s a long time from now, it’s only three short months away. When you factor in the hectic weeks of the coming holiday season, that really only leaves a few weeks to pull your tax information together to avoid the stress that being unprepared for tax season can bring.
Now is the time to think about what information you will need for the...
September 13, 2013
The opening of the government’s Health Insurance Marketplace (HIM) on October 1 is fast approaching and with it comes a new requirement to Section 18B of the Fair Labor Standards Act that all businesses should be aware of. By October 1, 2013 employers must provide written notices about health insurance options, including notification of the new health insurance marketplace, to their...
September 4, 2013
The beginning of September is synonymous with the back-to-school season. If you have a child attending college, or if you are a student yourself, September is also likely to be synonymous with the beginning of annual tuition payments. While attending and paying for college may be taxing in many ways, there is some good news when it comes to tax deductions and credits related to college...
August 16, 2013
Given the tough economy over the past few years, it has been particularly difficult for business owners and the individuals they employee to thrive financially. Couple the poor economic climate with the fact that many businesses, especially small ones, have few controls in place to prevent employee theft and you get statistics like these reported by the National Federation of Independent...
July 31, 2013
If you’re lucky enough to own a vacation home, or are thinking about investing in one, you should be aware of the tax implications associated with this type of property, particularly if you are planning to rent it at least some of the time. It is also important to note that the IRS definition of a vacation property encompasses not only houses, cottages, and condominiums, but also mobile...
July 16, 2013
As hard as it is to believe, the year is already half over. Although it may seem like the April tax deadline was just a few weeks ago, the reality is it’s time to start thinking about your 2013 taxes. And, if you spend some time now on mid-year tax planning, it can really pay off next April—which is only nine short months away. In addition, taking stock of where your business is halfway...
July 4, 2013
On Tuesday, July 2, the Obama administration announced that it is delaying the requirement that businesses with more than 50 employees provide health insurance to their workers or pay a penalty. The delay extends to 2015. The announcement by the IRS comes after numerous complaints from businesses that the requirements were too complicated and difficult to implement in time.
June 27, 2013
One of the key mandates of the Affordable Care Act (ACA), or “Obamacare” as the law is commonly known, is the creation of health insurance exchanges in each state. The intention of these exchanges is to give individuals and small businesses a means for buying affordable health insurance. With the October 1st launch date for the new health care exchanges fast approaching, business owners...
June 18, 2013
For years, aggressive, "do-what it takes" attitudes have been attributed to achieving professional success. Having at least a little bit of the "killer" instinct is what differentiates the winners in business, right? Perhaps in some cases, but according to research conducted by Wharton Business School professor, Adam Grant, the opposite is true. Success—both personal and professional—is...
May 30, 2013
We’ve said it before, and we’ll say it again… marketing is a key component of any successful business. So, we want to provide you with as much helpful information as we can in this area. We know marketing isn’t an easy task. It takes time and money. Of course, we understand that you have to keep a focus on the bottom line, which is why we are offering a few marketing tips for those of...
May 17, 2013
Whether your business sells seasonal products or provides services throughout the year, summer is a HOT season for marketing. The warmer weather offers some flexibility with marketing events and campaigns, and that means you can be creative. Most people like to get out during the summer months, so the potential to attract prospects and clients to your marketing events is higher. The following...
April 30, 2013
Technology is a wonderful thing. We know it in our firm because we use advanced technology to our advantage—that is, working anytime and from any device, having 24/7 access to files, and the ability to work from home, a client’s site, or the airport! And now that just about any gadget you can imagine is portable and affordable, your small business doesn’t have to be confined to your...
April 17, 2013
This was more than your typical tax season. With a plethora of changes to the tax code and a late start brought about by 11th hour congressional decisions, it was an even more harried and intense process than usual. We appreciate the good working relationships with our clients that helped us keep moving to meet the April 15 deadline—thank you!
With tax season just now moving into...
March 29, 2013
Hopefully, you are part of the more than 80% of taxpayers that take advantage of e-filing. If you’re not, we want to remind you WHY you should. Take a moment to read our short (but very convincing) list. The April 15th tax deadline is just around the corner, so we wanted to dedicate one last post to remind you of the value of e-filing your return.
- Safe &...
March 18, 2013
The tax deadline always seems to sneak up on taxpayers. Don’t fall into this trap and cause yourself added stress. If you’ve yet to pull things together…start preparing now. The following are four easy tips to be sure that you are ready for the April 15 tax deadline:
- Locate Last Year’s Tax Return—Previous years’ returns serve as an excellent...
February 28, 2013
As we look forward to the end of winter and the launch of spring, that also means the April 15th tax deadline is that much closer. Being prepared is the best way to ensure a smooth tax season and minimize any surprises. So, if you’ve yet to dig in and give some dedicated focus to your taxes, here are a few suggestions to get you going:
- Begin Gathering Source...
February 18, 2013
More than 80% of taxpayers file electronically…and for good reason. Or rather, good reasons (plural)—four to be exact. E-filing offers an efficient and highly secure method for filing your tax return. And if that’s not reason enough, take a moment to read through our Top 4:
- Accurate & Complete—E-filing is the best way to ensure that you file...
January 30, 2013
We are very excited to announce the launch of our new website! At Covenant CPA, we have been working very hard to redesign our website and create a place to business for our clients. Our Client Center is the online front-door to our firm for our clients. Through the Client Center you can:
- Access your account and review your financial documents any time and from...